Contents
4 Investment summary
8 Part I – EBIT margins expectations are too high
8 Watch H2 09 closely
9 Unrealistic expectation on EBIT margins: prices, sales growth and operating leverage
11 Margin expectations at the country level
12 EBIT margins at the sector level – Europe
17 Part II – Cash conversion a key valuation factor
18 Cash conversion rate and theoretical valuation
21 Part III – EBIT margin vs EV/sales
21 Methodology – our regression model
22 Sectors 2009e margins revised down, but EV/sales too high, in some cases
23 2010e margins need to be revised
24 The relationship between EBIT margins and EV sales by sector
24 Aerospace & Defence
26 Capital Goods
29 Metals & Mining
31 Building Materials
33 General Retailing
35 Food & Staples Retailing
37 Beverage
39 Household & Personal Products
41 Luxury Goods
43 Hotels, Restaurants & Leisure
45 Commercial Services
47 Appendices